The stock market wasn't kind to the controls industry in the first half of 2000. The Control Engineering Index (CEI) showed that prices for industrial control stocks fell 11% in 2Q00, which was more than the Dow Jones Industrial Average's decline (-4.3%), though less than the NASDAQ's drop (-13%). This was disappointing news because the CE Index was up over 6% in 1Q00, beating the Dow Jones, which was down by 5%.

The CE Market Value Index reflects this drop in prices for 2000's first half-performing well in 1Q00 and then stumbling in 2Q00. The main reason for this trend was a significant decrease in market value for CEI's second and third largest companies. After Allied Signal acquired Honeywell and assumed its name, the newly combined firm had a 35% drop in value during 2Q00 due to market volatility. Rockwell International experienced a 25% decline in value during this period. The index's largest firm, Tyco International, experienced more than 5% decrease in value. Meanwhile, Emerson and Flowserve posted gains in earnings, which helped limit the index's overall decrease to only 11%.

On the positive side, the earnings of these firms-represented by their earnings per share (EPS) for the past year-presents a much brighter picture with healthy increases in 1Q00. These companies' EPS increased from 1% to 96% with an overall average of approximately 7%. Investors considering whether to further depress controls industry stock prices should first take a take a closer look at how these firms' earnings are improving despite the overall market's performance.